Cybersquatting daisy-chain leads to Dell trademark infringement lawsuit

If you've been online longer than three minutes, chances are you've inadvertently stumbled across a cybersquatter's turf at least once or twice. Such domains (one specific example is www.yahhoo.com) are designed to take advantage of user typos, and drive pay-per-click advertising revenue back to domain name owners. Cybersquatting is a serious problem for business owners. The last thing any company wants is for its customers to be directed to websites that appear to belong to the trademark or brand owner and do not—especially if such sites could even potentially be outfitted to distribute virii, worms, or other malware. Now Dell has launched a heavy attack against a group of companies it alleges have systematically used its trademarks and brands without permission.

Dell isn't the first (or even the hundredth) to go after cybersquatters it believes are making a profit off its trademark(s), but the scope of this particular case is much broader than any I've heard of before. Dell's allegations target a number of (shell) companies, including:

BelgiumDomains
CapitolDomains
DomainDoorman
iHoldings.com (both a domain registrar and a corporate manager for the registrars listed above)
Netrian (also a corporate manager for the registrars listed above

The Round Rock-based company's filing alleges that the domain registrars listed above have created infringing
domain names that are "substantially indistinguishable from and confusingly similar to" its own marks.
Looking at the list of evidence Dell provides, it's hard to refute the point—25 pages of Dell's complaint are
filled with nothing but instance after instance of infringing domain names. According to Dell, these lists are only a
small sample of the infringement that's incurred. The suit states: "Because this list [of infringing
domains] is so voluminous, Exhibit 4 in its entirety has been filed in the form of a CD." Considering how
much plain text can fit on a regular CD-R, that's quite a bit of infringement.

Ars Video

Dell isn't just accusing the domain registrars we've listed of infringing on their trademarks—they also claim the companies in question colluded to do it. According to ICANN rules, a domain registrant has five days to "sample" their purchase. If they aren't satisfied with the traffic results, the domain name can be returned, and the person/corporation who registered it receives a full refund. That's a great idea in theory, but it also allows for a substantial amount of abuse. The following (taken from Dell's filing) demonstrates how a single domain—dellfinancialservices.com—changed hands over a period of days.

May 25, 2007: Domain registered by DomainDoorman; deleted May 30 2007
May 30, 2007: Domain registered by BelgiumDomains; deleted June 4 2007
June 4, 2007: Domain registered by Capitoldomains; deleted June 9 2007
June 9, 2007: Domain registered by DomainDoorman; deleted June 14 2007
June 14, 2007: Domain registered by BelgiumDomains... and so on, and so on.

Not only are the domain name squatters earning a profit off Dell brands and trademarks, they aren't even
paying domain name registration fees for doing it.

Most of Dell's specific allegations against the various companies are fairly standard. Dell claims its trademarks and brands were properly registered and well-known, that the registrars colluded and acted in bad faith, have no right to the brands they piggybacked, and have never used any of the domains they infringed upon for an actual business or in cooperation with the established business on whose trademark they infringed. Nothing here is out of the ordinary, but Dell's final allegation against the cybersquatting firms is a zinger.

According to Dell, the firms in question are guilty of both trademark infringement and counterfeiting. There's a legal difference between the two terms. All counterfeit trademarks are also infringing trademarks, but it's easier to prove that a trademark is "confusingly similar" (thus demonstrating infringement) than it is to prove that a trademark is "substantially indistinguishable," or counterfeit.

If Dell can prove that its trademark has actually been counterfeited, the company can press for much harsher penalties than are available to it if its trademark has merely been infringed. If infringement has taken place, Dell can request an injunction against the companies in question and has asked for triple damages plus attorney fees. Counterfeiting, however, is an entirely different ball game, as stated in the filing.

By reason of Defendants' use of the counterfeit domain names alleged herein, Plaintiffs are
entitled to recover Defendants' profits, actual damages, and the costs of the action...Alternatively,
Plaintiffs are entitled to recover statutory damages...in an amount of up to $1 million dollars for each
counterfeit domain name per type of goods or services sold, offered for sale, or distributed.

Claiming that actual counterfeiting has taken place is a long shot for Dell. A favorable ruling on the issue would definitely bring the hammer down on the alleged infringers and send a very strong message to other cybersquatters, but it could also potentially be turned into a weapon by corporations trying to strong-arm legitimate domain holders into giving up their property.